House Prices fall in Italy

Italy is the
only member state to have seen house prices shrink last year. It was revealed
by Eurostat which reported that house prices across the rest of Europe have
risen by more than 10% since 2010.

Between 2010
and 2017, house prices across the EU grew by an average of 11%. They shrank
only in 2009 as a result of the financial crisis to start growing again in
2014.

Some
countries saw a massive price increase during the seven-year period included in
the report. The most significant increases were in Estonia (+73 %), Sweden (+56
%) and Austria (+49 %), while in Spain, Italy and Cyprus, prices dropped by
17%, 15 % and 9 % respectively.

However,
house prices in Spain and Cyprus started to grow again in 2014 and 2016, but
Italy has continued to lag behind and in 2017 was the only country in the EU to
record another drop estimated at 0.8%.

The data is
confirmed by the European Construction Sector Observatory’s June 2018 report
according to which the number of Italian construction companies fell by 8.9%
between 2010 and 2016, and production dropped by nearly a third over that same
period. This downwards trend is continuing as also in the third quarter of last
year house prices dropped by 0.5 percent.

The
decreasing price of properties is extremely relevant in Italy because 72
percent of Italians own their own property, this means that homeowners were
damaged by the decreased value of their house as values drops 23 per cent in a
decade. Heavy damage was also caused to the construction and property sector.

According to
data from Cerved, an Italian business information provider, in 2016, 4.4
percent of construction firms failed, as well as 5.5 percent in 2013, this is a
lot higher than the 2.6 percent average across the industry. The country’s
banking system, which is still suffering from the 2008 financial crisis was
negatively affected by the property market.

In the last
years, the manufacturing sector has seen twice the amount of bad loans (loans
where repayments are not being made as originally agreed between the borrower
and the lender) which may even never be repaid. The property sector now
accounts for more corporate bad loans than any other sector, 42 percent
compared with 29 percent in 2011.

Homeowners
have been reluctant to acknowledge the reality of lower prices. This has fed in
to the rising stock of unsold housing that has delayed a recovery of the
market. A decade ago, property investors could help the housing sector to
recover as they accounted for one in five transactions, however, now they are
completely absent from the market.

On the other
hand, in Germany prices have become stifling. A large amount of the population
in the country’s capital Berlin is outpricing the average earner. Rents have
risen by 72 percent over the last 10 years, and the purchase price for an
apartment has doubled in the same period.